Less growth

Tariff conflicts due to Trump slow down global economy

(Bild: AP/AP ( via APA) Austria Presse Agentur)

The OECD has lowered its growth forecasts for the global economy, partly due to the tariff conflicts emanating from the USA. It is expected to grow by 3.1 percent this year and then by 3.0 percent in 2026, it said on Monday. In December, the Organization for Economic Cooperation and Development had still expected 3.3% in each case.

In 2024, growth had reached 3.2 percent. "The latest economic indicators point to a slowdown in global growth prospects," emphasized the OECD. "Significant changes have occurred in trade policy." The OECD therefore believes that the global economy is far from being in calm waters. "There are still considerable risks," it warned. "Further fragmentation of the global economy is a major problem." A higher and broader increase in trade barriers would hamper growth worldwide and fuel inflation.

Poor prospects for Canada and Mexico
The growth forecast for the world's largest economy, the USA, has been lowered from 2.4 to 2.2 percent for this year and from 2.1 to 1.6 percent for 2026. For Canada, it was cut from 2.0 to 0.7 percent for both years, while the Mexican economy is even expected to shrink by 1.3 and 0.6 percent. The OECD referred to the trade conflict with the two neighboring countries instigated by US President Donald Trump with punitive tariffs.

"In all three economies, economic activity would be stronger and inflation lower if the tariff increases were lower or limited to a smaller range of goods," said the OECD. The economic forecast for Austria has not been updated.

Trump announced high tariffs on goods from the two neighboring countries, to which Canada and Mexico responded with counter-tariffs on American goods. The organization lowered its growth forecast for the eurozone from 1.3% to 1.0% for 2025 and from 1.5% to 1.2% for 2026. Trump also raised tariffs on steel and aluminum from Europe last week. For its part, the EU has announced counter-tariffs for April.